Re: Re: Re: Re: the profit rate & recession

[Rakesh Bhandari <rakeshb@xxxxxxxxxxxx>]

> Doug, this may be misleading.  The rate of profit certainly did not
> increase continuously from 1980 to 1977, and then decline.  Rather, the
> rate of profit fluctuated up and then down in the 1980s, so that the rate
> of profit in 1992 (7.0%) was only slightly higher than it was in 1980
> (6.2%).  Similar fluctuations (with somewhat larger amplitudes) occurred
> in the 1990s, first an increase to 1997 and then a sharp decline to 7.1%
> in 2001).  So that the rate of profit today remains only slightly above
> what it was in the trough of the early 1980s.
>
> My conclusion from these estimates, as I have said many times before, is
> that the fundamental problem in the US economy of insufficient
> profitability has not yet been solved and continues to causes recessions
> and stagnation.


Fred,

You are probably correct, but here's what's been bothering me:

 Why should capitalism be more vulnerable to recessions and
stagnation simply because the profit rate is falling or low?

If the mass of capital advanced is growing, then the mass of surplus
value which is extorted can grow even if the rate of profit falls. If
the rate of capitalisation of surplus value grows along with the mass
of surplus value, then the demand for labor can remain sufficiently
strong to absorb population growth, no?

A falling profit rate does not ipso facto mean stagnation if by
stagnation you mean rising levels of real unemployment.


Investment demand (i.e., investment in constant and variable capital)
may be strong enough in fact to require that the valorization base be
enlarged through immigration. Strong enough in fact that even with
the immigration the valorization base may not large enough to sustain
investment demand in additional constant and variable capital going
forward.

 Why can't capital accumulation thus founder on a shortage of
labor--or at least labor available for accumulation--even if the rate
of profit is falling?

Jim says that this crisis was not preceded by a rising OCC; I know
Shaikh and you have questioned whether K/Y is a good proxy for the
OCC (and Shaikh relies on the work of one Victor Perlo here).

 But the OCC need not have been rising for profitability expectations
to have dimmed.  Capitalists may not have thought a sufficiently
large valorization base would be available for sustained
accumulation. They then curtailed their investments, which has then
multiplied out into a recession.

That is,  a perceived shortage of labor may have paradoxically led to
an oversupply of labor!


I am not suggesting a wage led profit squeeze--unit labor costs which
of course is not a good proxy for s/v did nonethless seem stable
before the recession-- but a shortage of labor thesis.

In fact it may have been the overwork of the population that
suggested that the valorization base was coming up insufficient vis a
vis the rate of accumulation.


 I  know this sounds absurd in a world of apparent overpopulation but
the population that was well placed and suited for exploitation may
have been coming up short in the eyes of capitalists, no?

If a perceived shortage of exploitable labor was the trigger of
retrenchment in investment, then the capitalist way out would be to
increase the supply of exploitable labor, e.g., by opening the border
with Mexico and "improving" the investment and labor codes abroad to
allow more foreign direct investment that is profitable.

The success of the WTO would then be a crucial political battle for
the capitalist class.

Rakesh